International Marketing for Consumer Products - Essay Example

? International Marketing Contents International Marketing Contents 2 Introduction 3 Product and product line 3 Proposed Export Country 4 Target market 8 Market sales potential 10 Marketing plan 11 Conclusion 13 Reference 13 Introduction The company is a Hong Kong based organisation which deals in consumer products. The company’s factory is located in China and has lately expanded the business into few Asian countries. The company believes in delivering the best product to its customers and quality products that would improve the life of consumers. With increasing demand for the products, and improving business situation in the global economy, the company decided to start engaging into foreign export business in Central America. Product and product line The company deals with consumer product goods. Its consumer product ranges from beauty products to household care products. Beauty products includes skincare products-creams, lotions, perfumes; hair care products- hair oil, shampoos, conditioner; Household care products includes packaged food, detergent powder and liquid, dish washer and toilet papers. The company has been investing a good amount of money in innovations and in Research and Development department. The company plans to expand into Central American country because of the growing opportunity and to create a global presence for itself. Therefore the product that the company would export is packaged food or so called ready to eat food. The reason for choosing this product is that Central America has a tremendous growth opportunity in the retail food segment especially for ready to eat foods. The company can export its packaged food items and try to capture a reasonable market share in the retail food segment. Packaged food items would include breakfast’s cereals, fresh fruits and vegetables, dairy products and snack foods. Proposed Export Country The country where the company should export is Central America. The reason for choosing Central America is that the country is experiencing a growth in the consumer products and it would sound profitable for the company to invest in a growing economy. The Central America includes seven states and they are United States, Dominican Republic, Costa Rica, Guatemala, El Salvador, Nicaragua and Honduras. There is a huge opportunity in the consumer product category especially in the ready food products. The company product line includes packaged foods; therefore it would help the company to expand its business in Central America. But the country has a preference for US products and the importers also prefer doing business with the exporters from US and consider them reliable and trustworthy. The US product has a better brand image than the local products in Central America (Food Export Association, 2011). The company can take this challenge as an opportunity and let the consumers of Central America experience a different brand, a brand from Hong Kong. The demographics of Central America states that the total population of the country is about 41,739,000 out of which Guatemala comprising the highest population of about 14,027,000 and least population with 307000 in Belize. Spanish is the dominant language of the country and official language in six countries. The culture of Central America is said to be rich despite of its small geographic area. Central America has a diverse culture especially in El Salvador, Honduras and Guatemala (Moving to Central America, 2011). The retail sector of Central America is expanding rapidly; the hypermarkets and the supermarkets are expanding into multiple markets in the region. The local touch is important for the people of Central America as they find it personal and reliable. The consumer products have been forecasted to have a positive growth rate especially for ready foods such as breakfast cereals, snack food, pancake mix, dairy products to name a few (Food Export Association, 2011). Entry strategy When a company plans to enter the international market, it is essential for a company to choose an entry strategy in order to achieve its international expansion goals. The strategies made by the company is important as it’s through this strategies the company would experience success in the overseas market. Choosing a right strategy reduces the cost as well as saves time, provides advantage and most importantly reduces the risk involved with international operation. Companies choose to enter international countries can choose from four entry strategies which includes exporting or importing, franchising, joint venture and wholly owned subsidiary (Neelankavil & Rai, 2009, p.147). The mode of strategy adopted by the Hong Kong Company of entering into Central America is the export strategy. The Hong Kong Company being a midsized enterprise, export is the best and also an easy strategy to adopt and increase its market share in foreign market, Central America. This strategy is adopted because exporting is very flexible as compared to other strategies such as FDI, Foreign direct investment. The Hong Kong Company can enter the market very easily and also at the same time withdraw from the market very easily with a minimal amount of risk and expense. But the exporting strategy is also not free from disadvantages. Since the Company would not be physically present, the management would get few opportunities to actually learn about the taste and preference of its customers, the strategies adopted by its competitors and all the other unique aspect of the market. Another disadvantage with exporting is that this strategy is much more sensitive to tariff and other barriers. Also a fluctuation in the exchange rate would lead to set back for the company. In order to make its presence feel in the international market, the Hong Kong Company should follow a systematic approach that would improve the company’s prospect in exporting successfully. Therefore the steps involved in exporting are, firstly the company should explore the opportunity of the target market, secondly, organise for exporting; thirdly, acquire the skills and competencies and lastly, implement the export strategy (Tamer, 2008, p.369). Figure 1: Systematic approach to Exporting (Source: Tamer, 2008, p. 369) The first step is to explore the specific country chosen to enter and find the most attractive region which shows signs of potential growth. The proposed exposed country is Central America and the region chosen for exporting the packaged food items is Costa Rica and Guatemala. These states have a tremendous growth opportunity for the packaged food items and have shown a steady economic rate post global economic slowdown. The consumers are demanding more of packaged foods which are easy to make as with a much busier life the consumer are switching on to the packaged food items. The regulations from the government are also stable allowing the foreign players to easily enter the market and do business. With a rise in the super markets and hypermarkets, the Hong Kong Company can tie up with such stores which would sell their food products. Therefore the Central America has wide opportunity to explore and established a brand in the retail food sector. The next step is to organise for exporting, the Hong Kong Company would be exporting into packaged food items as the growth of the packaged food is predicted to increase in the future and by 2014 most of the retailers would provide with packaged food items. So it is recommended that the company to export now as the future is full of opportunity. The fiscal year seems to be promising with further growth in the future. Since the retail food sector is booming, the company would definitely experience a profit and create a brand value for its product. The company would apply the direct exporting, where the local intermediaries would act on behalf of the company. The company would have a greater control over the export process but the management is required to dedicate itself to the export process. The company should acquire the needed skills and competencies as per the requirements of Central America. Most importantly the Company should adopt the culture and language as the official language is Spanish and the population in Costa Rica and Guatemala are not very much familiar with English language, the culture differs from that of Hong Kong, therefore the managers of the company should adopt to these changes and export the product with much of a local touch in it. Lastly, is to implement the export strategy, the packaged food to be exported should be according to the demand of the population. The country is experiencing a huge demand for breakfast cereals, snack food, fresh fruits and vegetables and dairy products. The mode of export would be through shipping as the country has ports surrounded its states, Guatemala surrounded by Santo Tomas de Castilla port and Costa Rica by Limon port. Therefore exporting by means of shipping would be profitable for the Hong Kong Company. Target market Initially the company would export in few states of Central America and gradually expand all over the country. The two states where the company would initially export are Costa Rica and Guatemala. Costa Rica has been enjoying a stable growth rate despite of the global economic crises. The advantage with regards to exporters is the country’s political stability and the fiscal incentive offered in the free trade zone. Costa Rica is an upper middle income country with a poverty rate below 3.5% as per 2008. Costa Rica has experienced a steady economic expansion for the past 25 years, its GDP rate has reached 8.8% in 2006 but due to global economy crises the economy grew only by 2.6% in 2008 showing a decline by 1.3% in 2009. In the fiscal 2010 Costa Rica recorded a rate of 4.2% growth. It is predicted that the GDP would remain at 4% and 4.5% for the next few years (The World Bank, 2011). The retail sale of packaged food was reported to be US$1.2billion in the year 2009. Euro monitor has forecasted an increase in this sector by 14.7% from 2009-2014. the top retail packaged food in Costa Rica includes dairy, bakery products, confectionery , oils and facts , snack foods and also sauces and dressings. The demands for the packaged food increased due to the urbanization in the states for over the past five years and also with a busier lifestyle, the demand for consumer food products increased rapidly, boosting the sale for packaged foods. Consumers are willing to pay more for a greater convenience which would drive sales in the packaged food sector. Therefore Costa Rica consumer food market includes snack foods, egg and egg products, fresh vegetables, poultry meals and fresh vegetables and fruits (Food Export Association, 2011). Thus the company should supply as per the requirements of the country and create market presence for its brand. The next target market would be Guatemala. Guatemala is one of the most popular states in Central America with Gross Domestic Product being roughly one third of Brazil, Argentina and Chile and accounts for the largest economy. As per the CAFTA-DR, the state has entered a free trade agreement zone with the Dominican Republic, Taiwan, Mexico, Chile and Colombia. The global financial crises also had an impact reducing the growth to 3.3% in 2008 and by 0.6%in 2009. The GDP in the fiscal 2010 reached 2.5% and in 2011 by 3.1% (The World Bank, 2011). Guatemala has also been experiencing a steady growth in the consumer products as super markets are expanding, more and more outlets have been set up and with a changing habit of consumers and a strong brand awareness the retail market have experiencing a boom and is forecasted to remain stable in the coming years or so. Guatemala retail sales of packaged food has increased tremendously and reached about US$3.7billion making Guatemala the largest and the biggest market in Central America and is expected to grow by 16% leading to US$4.2million by 2014 (The World Bank, 2011). The most preferred packaged food includes diary, bakery, snack, confectionery, oils and fats and dried processed food. The state also attracts tourist which is one of the key point for its growth. Therefore the company can enter the food sector and export its product in Guatemala which would help the company to further expand into other states of Central America. Market sales potential As per the report presented by Euro monitor, the sales of packaged food continue to improve from the recession of 2008 in Costa Rica, when the sales of packaged food dropped down drastically. Instead of the slow growth rate, it is predicted that the market of packaged food has a potential to grow particularly the breakfast items and ready to eat noodles. The government has been promoting health concerns which in turn boost up the sales of packaged food. Due to a change in the consumption pattern the consumers are demanding more healthy food which is easy in preparation. Although the 2011 forecast did not yield a positive result for the packaged food but it is predicted to have a strong sales growth in near future. This generates an opportunity for the company to launch its packaged food in the Costa Rica region which has a potential to grow in the future. The company can launch its breakfast cereals which are healthy and easy to make. Due to a busy life the consumers have switched to packaged food giving rise to supermarkets and the hypermarkets. These super markets continue to expand and gain the market share and also expecting to grow in the near future. With the help of these supermarkets, the company can export its food products as the packaged food sales are expected to recover and grow over the coming years. Euro monitor forecasted that the sale of packaged food will be boosted by good performance specially the nutrition products which are increasing becoming a part of the Costa Rican consumers (Euro monitor, 2011). The market of Guatemala seems to more stable than Costa Rica. A stable performance is expected by the region following the 2010 recovery. In order to attract the consumers in Guatemala, the company needs to produce innovative products. The retail market in Guatemala is an emerging market with many opportunities for growth in the future. The region has attracted many franchises such as Wal-Mart in the retail sector, others include Burger King, Subway, Dominos Pizza, Pizza hut, Mc Donald’s to name a few (Food Export Association, 2011) . This shows that the region is growing as an emerging state for exporters to export and enjoy the success. Therefore the company can quite easily become a part of the retail food sector with the introduction of its packaged food line. The retail food sector is at a growing stage offering a valuable opportunity for the exporter to invest and earn high revenue. Marketing plan The marketing plan consists of the marketing mix, the 4Ps. The 4Ps consists of Product, Price, Place and Promotion. An effective marketing mix helps in the growth of the company. It forms an essential part of the marketing plan. The marketing plan of Hong Kong Company is as follows: Product: The product is consumer product and the product offered in the international market is packaged food items. The packaged food would constitute of dairy products, snack, fresh vegetables and fruits and breakfast cereals. A majority of population in Costa Rica and Guatemala prefers healthy food and which can be easily made. Thus the demand for the packaged food items are increasingly raising and the Hong Kong Company can well trap the packaged food market with its products offering. Place: The international market that the company decided to enter is Central America. The two regions where the company would export initially are Costa Rica and Guatemala. Guatemala is an emerging market and already a few numbers of franchiser are operating in the state. The company would export by means of shipping as the country is blessed with ports surrounding it. The target market is also surrounded by ports thus it would prove to be beneficial for the company to choose the ports as a means to export in the country. Price: The product being a consumer product, a food product the pricing strategy that would be followed by the Hong Kong Company would be competitive based pricing. The local companies have already captured the market share of the target market, thus if the company charges a high price than its local and international competitors, the company would experience a set back as consumers might not go for the Company’s food product. Therefore the best strategy is to follow the competitors and set the price accordingly. Promotion: Promotion is the most essential tool in a marketing mix. A proper communication with the target market leads to a success of a brand. Therefore a proper promotional method must be adopted specially when launching a product in the foreign market. The Central American populations official language is Spanish, therefore it is necessary that a majority of promotions about the products to be done in Spanish. The company based on Hong Kong whose official language is Chinese and English must adopt the Spanish language while promoting in Central America. The advertisement should be displayed in Spanish and also in English as 1% of the population speaks English. The culture is very different from that of Hong Kong and the population of Central America feels that US products are more reliable and trustworthy, therefore to create a brand image the company would have to deliver good quality and healthy products. The company can advertise its product through television, display banners stating its benefits of consuming its product. The company can tie up with the local retailers to promote its product. Therefore it is important for the Hong Kong based company to think local but act global. Conclusion Therefore the Hong Kong based company has decided to enter the market of Central America and the strategy adopted to enter the market is through exporting. The country has a huge demand for the packaged food item which the Hong Kong Company would export in the country. The company would initially export in two different regions Costa Rica and Guatemala. Later when the company acquires a decent portion of the market share and is able to create a brand image, the company would explore into the other states of Central America. The Central American retail food sector is at a growing stage thus the company would gain and is advisable to export from the current fiscal year. Reference Euro Monitor. (2011). Packaged Food in Costa Rica. [Online]. Available at: http://www.euromonitor.com/packaged-food-in-costa-rica/report. [Accessed on December 9, 2011]. Food Export Association. (2011). Central America Market Profile. [Online]. Available at: http://www.foodexport.org/Resources/CountryProfileDetail.cfm?ItemNumber=1006. [Accessed on December 8, 2011]. Moving to Central America. (2011). Central America: Facts & Stats. [Online]. Available at: http://www.moving2centralamerica.com/facts-and-stats/demographics.html. [Accessed on December 9, 2011]. Neelankavil, J. P. & Rai, A. (2009). Basics of International Business. M.E. Sharpe. Tamer, C. (2008). International Business. Pearson Education India. The World Bank. (2011). Costa Rica. [Online]. Available at: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/COSTARICAEXTN/0,,contentMDK:20232979~pagePK:141137~piPK:141127~theSitePK:295413,00.html. [Accessed on December 9, 2011]. The World Bank. (2011). Guatemala. [Online]. Available at: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/GUATEMALAEXTN/0,,contentMDK:22254443~pagePK:1497618~piPK:217854~theSitePK:328117,00.html. [Accessed on December 9, 2011]. Read More